October 2010 Philippine Supreme Court Decisions on Remedial Law (Part III)

Counterclaims; tests to determine if compulsory.  Going now to the first assigned error, petitioner submits that its counterclaim for the rentals collected by Fernando from the CMTC is in the nature of a compulsory counterclaim in the original action of Fernando against petitioner for annulment of bid award, deed of absolute sale and TCT No. 76183. Respondents, on the other hand, alleged that petitioner’s counterclaim is permissive and its failure to pay the prescribed docket fees results into the dismissal of its claim.

To determine whether a counterclaim is compulsory or not, the Court has devised the following tests: (a) Are the issues of fact and law raised by the claim and by the counterclaim largely the same? (b) Would res judicata bar a subsequent suit on defendant’s claims, absent the compulsory counterclaim rule? (c) Will substantially the same evidence support or refute plaintiff’s claim as well as the defendant’s counterclaim? and (d) Is there any logical relation between the claim and the counterclaim? A positive answer to all four questions would indicate that the counterclaim is compulsory.

Tested against the above-mentioned criteria, this Court agrees with the CA’s view that petitioner’s counterclaim for the recovery of the amount representing rentals collected by Fernando from the CMTC is permissive. The evidence needed by Fernando to cause the annulment of the bid award, deed of absolute sale and TCT is different from that required to establish petitioner’s claim for the recovery of rentals.  The issue in the main action, i.e., the nullity or validity of the bid award, deed of absolute sale and TCT in favor of CMTC, is entirely different from the issue in the counterclaim, i.e., whether petitioner is entitled to receive the CMTC’s rent payments over the subject property when petitioner became the owner of the subject property by virtue of the consolidation of ownership of the property in its favor.  Government Service Insurance System (GSIS) vs. Heirs of Fernando P. Caballero, et al., G.R. No. 158090, October 4, 2010

Docket fees; GSIS not exempt from payment.  Petitioner [GSIS] further argues that assuming that its counterclaim is permissive, the trial court has jurisdiction to try and decide the same, considering petitioner’s exemption from all kinds of fees.

In In Re: Petition for Recognition of the Exemption of the Government Service Insurance System from Payment of Legal Fees, the Court ruled that the provision in the Charter of the GSIS, i.e., Section 39 of Republic Act No. 8291, which exempts it from “all taxes, assessments, fees, charges or duties of all kinds,” cannot operate to exempt it from the payment of legal fees. This was because, unlike the 1935 and 1973 Constitutions, which empowered Congress to repeal, alter or supplement the rules of the Supreme Court concerning pleading, practice and procedure, the 1987 Constitution removed this power from Congress.  Hence, the Supreme Court now has the sole authority to promulgate rules concerning pleading, practice and procedure in all courts.

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October 2010 Philippine Supreme Court Decisions on Civil Law

Here are selected October 2010 rulings of the Supreme Court of the Philippines on civil law:

Agency. The sale of the DMCI shares made by EIB is null and void for lack of authority to do so, for petitioners never gave their consent or permission to the sale. Moreover, Article 1881 of the Civil Code provides that “the agent must act within the scope of his authority.” Pursuant to the authority given by the principal, the agent is granted the right “to affect the legal relations of his principal by the performance of acts effectuated in accordance with the principal’s manifestation of consent.”  In the case at bar, the scope of authority of EIB as agent of petitioners is “to retain, apply, sell or dispose of all or any of the client’s [petitioners’] property,” if all or any indebtedness or other obligations of petitioners to EIB are not discharged in full by petitioners “when due or on demand in or towards the payment and discharge of such obligation or liability.” The right to sell or dispose of the properties of petitioners by EIB is unequivocally confined to payment of the obligations and liabilities of petitioners to EIB and none other. Thus, when EIB sold the DMCI shares to buy back the KKP shares, it paid the proceeds to the vendees of said shares, the act of which is clearly an obligation to a third party and, hence, is beyond the ambit of its authority as agent. Such act is surely illegal and does not bind petitioners as principals of EIB. Pacific Rehouse Corporation, et al. vs. EIB Securities, Inc.;G.R. No. 184036, October 13, 2010.

Attorney’s fees. It is settled that the award of attorney’s fees is the exception rather than the general rule; counsel’s fees are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate. Attorney’s fees, as part of damages, are not necessarily equated to the amount paid by a litigant to a lawyer. In the ordinary sense, attorney’s fees represent the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter; while in its extraordinary concept, they may be awarded by the court as indemnity for damages to be paid by the losing party to the prevailing party. Attorney’s fees as part of damages are awarded only in the instances specified in Article 2208 of the Civil Code. As such, it is necessary for the court to make findings of fact and law that would bring the case within the ambit of these enumerated instances to justify the grant of such award, and in all cases it must be reasonable. Filomena R. Benedicto vs. Antonio Villaflores; G.R. No. 185020. October 6, 2010.

Attorney’s fees. We have stressed that the award of attorney’s fees is the exception rather than the rule, as they are not always awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.  Attorney’s fees as part of damages is awarded only in the instances specified in Article 2208 of the Civil Code. Financial Building Corporation vs. Rudlin International Corporation, et al./Rudlin International Corporation, et al.  vs. Financial Building Corporation; G.R. No. 164186/G.R. No. 164347. October 4, 2010.

Attorney’s fees. An award of attorney’s fees is the exception rather than the rule.  The right to litigate is so precious that a penalty should not be charged on those who may exercise it erroneously.  It is not given merely because the defendant prevails and the action is later declared to be unfounded unless there was a deliberate intent to cause prejudice to the other party. Spouses Ramy and Zenaida Pudadera vs. Ireneo Magallanes and the late Daisy Teresa cortel Magallanes, substituted by her children, Nelly M. Marquez, et al.;G.R. No. 170073, October 18, 2010.

Compensation; partial set-off. Under the circumstances, fairness and reason dictate that we simply order the set-off of the petitioners’ contractual liabilities totaling P575,922.13 against the repair cost for the defective gutter, pegged at P717,524.00, leaving the amount of P141,601.87 still due from the respondent. Support in law for this ruling for partial legal compensation proceeds from Articles 1278, 1279, 1281, and 1283 of the Civil Code. In short, both parties are creditors and debtors of each other, although in different amounts that are already due and demandable. Spouses Victoriano chung and Debbie Chung vs. Ulanday Construction, Inc.;G.R. No. 156038, October 11, 2010.

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March 2010 Philippine Supreme Court Decisions on Remedial Law

Here are selected March 2010 rulings of the Supreme Court of the Philippines on remedial law:

Civil Procedure

Actions; action for reformation of instrument; requisites. For an action for reformation of instrument to prosper, the following requisites must concur: (1) there must have been a meeting of the minds of the parties to the contract; (2) the instrument does not express the true intention of the parties; and (3) the failure of the instrument to express the true intention of the parties is due to mistake, fraud, inequitable conduct or accident.  Petitioner having admitted the existence and execution of the instrument, what remains to be resolved is whether the contract expressed the true intention of the parties; if not, whether it was due to mistake, fraud, inequitable conduct or accident.  The onus probandi is upon the party who insists that the contract should be reformed.  Notarized documents, like the deed in question [i.e., “Sale and Transfer of Rights over a Portion of a Parcel of Land”], enjoy the presumption of regularity which can be overturned only by clear, convincing and more than merely preponderant evidence.  This petitioner failed to discharge.  Flordeliza Emilio vs. Bilma Rapal, G.R. No. 181855, March 30, 2010.

Actions; annulment of judgment. The Court finds that petitioner properly availed of the remedy of a petition for annulment of judgment in challenging the Manila RTC Decision.  In his petition with the appellate court, he did not limit his ground to extrinsic fraud, as he invoked as well the Manila RTC’s lack of jurisdiction to annul the proceedings in the Pagadian RTC which is a court of co-equal and coordinate jurisdiction.  Since petitioner’s petition raised lack of jurisdiction, he did not have to allege that the ordinary remedies of new trial, reconsideration or appeal were no longer available through no fault of his.  This is so because a judgment rendered or final order issued by the RTC without jurisdiction is null and void and may be assailed any time either collaterally or in a direct action, or by resisting such judgment or final order in any action or proceeding whenever it is invoked.  Jose Cabaral Tiu v. First Plywood Corporation/Jose Cabaral Tiu vs. Timber Exports, Inc. Angel Domingo, Country Bankers Ins. Corp., Perfecto Mondarte, Jr. and Cesar Dacal, G.R. No. 176123/G.R. No.  185265, March 10, 2010

Actions; attack on title. The petitioners contend that this action for quieting of title should be disallowed because it constituted a collateral attack on OCT No. RO-9969-(O-20449), citing Section 48 of Presidential Decree No. 1529, viz:

Section 48. Certificate not subject to collateral attack.– A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

The petitioners’ contention is not well taken.  An action or proceeding is deemed an attack on a title when its objective is to nullify the title, thereby challenging the judgment pursuant to which the title was decreed.  The attack is direct when the objective is to annul or set aside such judgment, or enjoin its enforcement. On the other hand, the attack is indirect or collateral when, in an action to obtain a different relief, an attack on the judgment is nevertheless made as an incident thereof.  Teofisto Oño, et al. vs. Vicente N. Lim, G.R. No. 154270, March 9,  2010

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December 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected December 2009 rulings of the Supreme Court of the Philippines on civil law and related laws:

Agency; agency by estoppel. An agency by estoppel, which is similar to the doctrine of apparent authority requires proof of reliance upon the representations, and that, in turn, needs proof that the representations predated the action taken in reliance.

There can be no apparent authority of an agent without acts or conduct on the part of the principal and such acts or conduct of the principal must have been known and relied upon in good faith and as a result of the exercise of reasonable prudence by a third person as claimant, and such must have produced a change of position to its detriment. Such proof is lacking in this case.  Yun Kwan Byung vs. Philippine Amusement Gaming Corporation, G.R. No. 163553, December 11, 2009.

Agency; implied agency. Article 1869 of the Civil Code states that implied agency is derived from the acts of the principal, from his silence or lack of action, or his failure to repudiate the agency, knowing that another person is acting on his behalf without authority. Implied agency, being an actual agency, is a fact to be proved by deductions or inferences from other facts.

On the other hand, apparent authority is based on estoppel and can arise from two instances. First, the principal may knowingly permit the agent to hold himself out as having such authority, and the principal becomes estopped to claim that the agent does not have such authority. Second, the principal may clothe the agent with the indicia of authority as to lead a reasonably prudent person to believe that the agent actually has such authority. In an agency by estoppel, there is no agency at all, but the one assuming to act as agent has apparent or ostensible, although not real, authority to represent another.

The law makes no presumption of agency and proving its existence, nature and extent is incumbent upon the person alleging it. Whether or not an agency has been created is a question to be determined by the fact that one represents and is acting for another. Yun Kwan Byung vs. Philippine Amusement Gaming Corporation, G.R. No. 163553, December 11, 2009.

Agency;  implied agency. The basis for agency is representation, that is, the agent acts for and on behalf of the principal on matters within the scope of his authority and said acts have the same legal effect as if they were personally executed by the principal. On the part of the principal, there must be an actual intention to appoint or an intention naturally inferable from his words or actions, while on the part of the agent, there must be an intention to accept the appointment and act on it. Absent such mutual intent, there is generally no agency.

There is no implied agency in this case because PAGCOR did not hold out to the public as the principal of ABS Corporation. PAGCOR’s actions did not mislead the public into believing that an agency can be implied from the arrangement with the junket operators, nor did it hold out ABS Corporation with any apparent authority to represent it in any capacity. The Junket Agreement was merely a contract of lease of facilities and services.  Yun Kwan Byung vs. Philippine Amusement Gaming Corporation, G.R. No. 163553, December 11, 2009.

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November 2009 Philippine Supreme Court Decisions on Civil Law

Here are selected November 2009 Philippine Supreme Court decisions on civil law and related laws:

Civil Code

Contract;  contract of adhesion.     A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his “adhesion” thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing. Contracts of adhesion are not invalid per se.  Contracts of adhesion, where one party imposes a ready-made form of contract on the other, are not entirely prohibited. The one who adheres to the contract is, in reality, free to reject it entirely; if he adheres, he gives his consent.  Norton Resources and Development Corporation vs. All Asia Bank Corporation, G.R. No. 162523. November 25, 2009

Contract;  freedom of contract. Petitioners allege that the Kasulatan was entered into by the parties freely and voluntarily. They maintain that there was already a meeting of the minds between the parties as regards the principal amount of the loan, the interest thereon and the property given as security for the payment of the loan, which must be complied with in good faith. Hence, they assert that the Court of Appeals should have given due respect to the provisions of the Kasulatan. They also stress that it is a settled principle that the law will not relieve a party from the effects of an unwise, foolish or disastrous contract, entered into with all the required formalities and with full awareness of what he was doing.

Petitioners’ contentions deserve scant consideration. In Abe v. Foster Wheeler Corporation, we held that the freedom of contract is not absolute. The same is understood to be subject to reasonable legislative regulation aimed at the promotion of public health, morals, safety and welfare. One such legislative regulation is found in Article 1306 of the Civil Code which allows the contracting parties to “establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order or public policy.”

To reiterate, we fully agree with the Court of Appeals in holding that the compounded interest rate of 5% per month, is iniquitous and unconscionable. Being a void stipulation, it is deemed inexistent from the beginning. The debt is to be considered without the stipulation of the iniquitous and unconscionable interest rate. Accordingly, the legal interest of 12% per annum must be imposed in lieu of the excessive interest stipulated in the agreement, in line with our ruling in Ruiz v. Court of Appeals.  Sps. Isagani & Diosdada Castro vs. Angelina de Leon Tan, G.R. No. 168940, November 24, 2009.

Contract; laches. The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it.

Respondent discovered in 1991 that a new owner’s copy of OCT No. 535 was issued to the Eniceo heirs. Respondent filed a criminal case against the Eniceo heirs for false testimony. When respondent learned that the Eniceo heirs were planning to sell the Antipolo property, respondent caused the annotation of an adverse claim. On 16 January 1996, when respondent learned that OCT No. 535 was cancelled and new TCTs were issued, respondent filed a civil complaint with the trial court against the Eniceo heirs and petitioner. Respondent’s actions negate petitioner’s argument that respondent is guilty of laches.  Kings Properties Corporation, Inc. vs. Canuto A. Galido, G.R. No. 170023. November 27, 2009

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November 2009 Philippine Supreme Court Decisions on Remedial Law

Here are selected November 2009 Philippine Supreme Court decisions on remedial law:

Action;  forum shopping. Petitioners Espiritu, et al. point out that the certificate of non-forum shopping that respondents KPE and Petron attached to the petition they filed with the Court of Appeals was inadequate, having been signed only by Petron, through Atty. Cruz.

But, while procedural requirements such as that of submittal of a certificate of non-forum shopping cannot be totally disregarded, they may be deemed substantially complied with under justifiable circumstances. One of these circumstances is where the petitioners filed a collective action in which they share a common interest in its subject matter or raise a common cause of action. In such a case, the certification by one of the petitioners may be deemed sufficient.

Here, KPE and Petron shared a common cause of action against petitioners Espiritu, et al., namely, the violation of their proprietary rights with respect to the use of Gasul tanks and trademark. Furthermore, Atty. Cruz said in his certification that he was executing it “for and on behalf of the Corporation, and co-petitioner Carmen J. Doloiras.” Thus, the object of the requirement – to ensure that a party takes no recourse to multiple forums – was substantially achieved. Besides, the failure of KPE to sign the certificate of non-forum shopping does not render the petition defective with respect to Petron which signed it through Atty. Cruz. The Court of Appeals, therefore, acted correctly in giving due course to the petition before it.  Manuel C. Espiritu, Jr., et al. vs. Petron Corporation, et al., G.R. No. 170891, November 24, 2009.

Action;  real party in interest. As the successor-in-interest of the late Arsenio E. Concepcion and co-owner of the subject property, respondent Nenita S. Concepcion is entitled to prosecute the ejectment case not only in a representative capacity, but as a real party-in-interest. Article 487 of the Civil Code states, “Any one of the co-owners may bring an action in ejectment.” Hence, assuming that respondent failed to submit the proper documents showing her capacity to sue in a representative capacity for the estate of her deceased husband, the Court, in the interest of speedy disposition of cases, may deem her capacitated to prosecute the ejectment case as a real party-in-interest being a co-owner of the subject property considering that the trial court has jurisdiction over the subject matter and has also acquired jurisdiction over the parties, including respondent Nenita S. Concepcion.  Angelina S. Soriente, et al. vs. The Estate of the late Arsenio E. Concepcion, etc., G.R. No. 160239, November 25, 2009.

Appeal; locus standi. Petitioners correctly argue that the Credit Cooperative has no locus standi on appeal, since it failed to file a notice of appeal to the RTC’s September 14, 1999 Decision granting the motion for summary judgment. It was only the Union which appealed the case through a notice of appeal filed by its counsel, Atty. Luciano R. Caraang (Atty. Caraang). There is also no showing that Atty. Caraang represented both the Union and the Credit Cooperative in filing such notice of appeal. In fact, the Credit Cooperative did not deny its failure to file an appeal; however, it argued that it filed with the Court of Appeals an appellant’s brief in compliance with the appellate court’s directive to submit one. Suffice it to state that the Court of Appeals’ directive for the Credit Cooperative to file its brief did not clothe the Credit Cooperative with locus standi on appeal. The purpose of the filing of the brief is merely to present, in coherent and concise form, the points and questions in controversy, and by fair argument on the facts and law of the case, to assist the court in arriving at a just and proper conclusion. The Court of Appeals may have ordered the Credit Cooperative to submit its brief to enable it to properly dispose of the case on appeal. However, in the Credit Cooperative’s brief, not only did it ask for the reversal of the Summary Judgment but also prayed for the return of its garnished funds. This cannot be allowed. It would be grave error to grant the relief prayed for without violating the well-settled rule that a party who does not appeal from the decision may not obtain any affirmative relief from the appellate court other than what he has obtained from the lower court, if any, whose decision is brought up on appeal.

The rule is clear that no modification of judgment could be granted to a party who did not appeal.   Jose Feliciano Loy, et al. vs. San Miguel Corporation Employees Union-Philippine Transport and General Workers Organization (SMCEU-PTGWO), et al., G.R. No. 164886, November 24, 2009.

Arbitration;  third parties. We agree with the CA ruling that the BPPA arbitration clause does not apply to the present case since third parties are involved. Any judgment or ruling to be rendered by the panel of arbitrators will be useless if third parties are included in the case, since the arbitral ruling will not bind them; they are not parties to the arbitration agreement. In the present case, DOLE included as parties the spouses Abujos and Oribanex since they are necessary parties, i.e., they were directly involved in the BPPA violation DOLE alleged, and their participation are indispensable for a complete resolution of the dispute. To require the spouses Abujos and Oribanex to submit themselves to arbitration and to abide by whatever judgment or ruling the panel of arbitrators shall make is legally untenable; no law and no agreement made with their participation can compel them to submit to arbitration.  Stanfilco Employees Agrarian Reform Beneficiaries Multi-Purpose Cooperative vs. DOLE Philippines, Inc. (Stanfilco Division), Oribanex Services, Inc., Spouses Elly and Myrna Abujos, G.R. No. 154048, November 27, 2009.

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November 2009 Philippine Supreme Court Decisions on Commercial Law

Here are selected November 2009 Philippine Supreme Court decisions on commercial law:

Corporate employees;  appointment. Ordinary company employees are generally employed not by action of the directors and stockholders but by that of the managing officer of the corporation who also determines the compensation to be paid such employees. Corporate officers, on the other hand, are elected or appointed by the directors or stockholders, and are those who are given that character either by the Corporation Code or by the corporation’s by-laws.

Here, it was the PDMC president who appointed petitioner Gomez administrator, not its board of directors or the stockholders. The president alone also determined her compensation package. Moreover, the administrator was not among the corporate officers mentioned in the PDMC by-laws. The corporate officers proper were the chairman, president, executive vice-president, vice-president, general manager, treasurer, and secretary.  Gloria V. Gomez vs. PNOC Development and Management Corporation (PDMC), G.R. No. 174044, November 27, 2009.

Rehabilitation; accommodation mortgagors. The rehabilitation court committed no reversible error when it removed TCT No. 133164 from the coverage of the stay order. The Interim Rules of Procedure on Corporate Rehabilitation is silent on the enforcement of claims specifically against the properties of accommodation mortgagors. It only covers the suspension, during the pendency of the rehabilitation, of the enforcement of all claims against the debtor, its guarantors and sureties not solidarily liable with the mortgagor.

Furthermore, the newly adopted Rules of Procedure on Corporate Rehabilitation has a specific provision for this special arrangement among a debtor, its creditor and its accommodation mortgagor. Section 7(b), Rule 3 of the said Rules explicitly allows the foreclosure by a creditor of a property not belonging to a debtor under corporate rehabilitation.  Pacific Wide Realty and Development Corporation vs. Puerto Azul Land, Inc./Pacific Wide Realty and Development Corporation Vs. Puerto Azul Land, Inc., G.R. No. 178768/G.R. No. 180893, November 25, 2009.

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